Presentation on Taxation in Zambia

ByMirriam Sabi

Assistant Director

June 4, 2015

ZAMBIA TAX REGIME

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INTRODUCTION

• ZRA was established by the Zambia Revenue AuthorityAct No. 28 of 1993, Chapter 321 of the Laws of Zambia

• The mandate of ZRA is to:

(a) to assess, charge, levy and collect all revenue due to Government;

(b) to ensure that all revenue collected is, as soon as reasonably practicable, credited to the Treasury;

(c) subject only to the laws specified under (a), to perform such other functions as the Minister maydetermine.

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ZRA MISSION

• “To maximise and sustain revenue collections through integrated, efficient, cost-effective and transparent systems, professionally managed to meet the expectations of all stakeholders”

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TAXES ADMINISTERED BY ZRA

Taxes Administered by ZRA include:

• Income Tax:

-Company Tax

-PAYE

-Self employed Individuals Tax

-Presumptive Taxes

• Property Transfer Tax;

• Mineral Royalty

• Medical Levy;

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TAXES ADMINISTERED BY ZRA

(cont’d)

• Value Added Tax (VAT);

• Excise Duty;

• Customs Duty;

• Surtax on carbon emissions.

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1. VALUE ADDED TAX

What is VAT?

• It is a consumption tax levied on:

a) the supply of goods and services in Zambia and;

b) importations.

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VAT (cont’d)

• Types of supplies:

a) Exempt-will not attract VAT and Input VAT is not claimable ;

b) Zero rated- supplies where VAT is 0% e.g. export of goods and mosquito nets;

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VAT (cont’d)

c) standard rate

-goods and services made by a taxable supplier other than an exempt supply

-liable to VAT;

-Rate is 16.0%;

-Input VAT claimable.

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VAT (cont’d)

• Eligibility to register for VAT:

1. Statutory Registration

-Any person, corporation, partnership jointventure or organization involved in the supply oftaxable goods and/or services and whose taxableturnover exceeds K800,000 p.a or K200,000per qtr is eligible for VAT registration.

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VAT (cont’d)

2. Voluntary VAT registration

Any person, corporation or organization whose taxable turnover is below K800,000 may register under the Voluntary Value Added Tax Registration scheme- this registration expires and is renewable upon request from the taxpayer.

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VAT FISCAL INCENTIVES

• Relief for VAT registered businesses on imports of eligible capital goods. (VAT Deferment);

• Zero rate on export of taxable products;

• Relief of VAT on transfer of business as a going concern;

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VAT INCENTIVES (cont’d)

• Equal treatment of services for VAT-Reverse VAT;

• Cash accounting for specialized associations e.g. Association of Building and Civil Engineering Contractors;

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VAT SPECIFIC INCENTIVES

Agriculture:

• Input tax claim for four years prior to commencement of production VATable agricultural businesses;

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VAT SPECIFIC INCENTIVES

(cont’d)

Manufacturing:

• Input tax claim for two years prior to commencement of production.

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VAT SPECIFIC INCENTIVES

(cont’d)

Mining

• Input tax claim for seven years on pre-production expenditure for exploration companies in the mining sector; and for any other mining it is four years

• Zero rate on mining products for export.

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VAT SPECIFIC INCENTIVES

(cont’d)

Tourism• Zero rate - Tour Packages;

• VAT is not charged on all goods temporarily imported into the Country by foreign tourists.

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2. DIRECT TAXES.

• Company Tax:

Tax on Gains and Profits earned by incorporated businesses with turnovers of K800,000 and above.

Generally the tax rate is at 35% with a few exceptions-refer to tax rate schedule

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3. PROPERTY TRANSFER TAX

• Taxation of proceeds from sale of land, buildings, shares and sale of mining rights.

• The rate is 10% of selling price.

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4. WITHHOLDING TAX

• Interest on business bank savings, Public entertainment.

• Rental Income, Consultancy fees, Management fees, Commissions, Royalties, Dividends, Contractors, Public entertainment.

• The rate ranges from 10% to 20%.

5.Mineral Royalty

• Underground mining: 8%

• Open Cast Mining operations: 20%

• Person in possession of minerals other than industrial minerals: 20%

• Person in possession of industrial minerals: 6%

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6. Presumptive Tax

• Passenger transport:

Tax on Individual Minibus and Taxi Operators.

Predetermined daily amounts are paid by the operators based on vehicle carrying capacities.

These daily amounts constitute a Final Tax.

• Turnover Tax:

-Applicable to small businesses whose turnover is below K800,000 p.a

-Rate is 3%

Detailed Tax Rates

• Refer to schedule on tax rates under Domestic Taxes

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7. CUSTOMS DUTIES

• Customs Duty

• Charged on all goods entering the country. Rates range between 0 and 25%.

• Import VAT

• Charged on all imported goods according to the applicable domestic rate I.e. standard rate of 16%, zero or exempt.

• Excise Duty

Charged on selected goods of a luxurious nature.

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Calculation of Taxes

V. D. P.

Based on the value for Duty Purposes which constitutes;–The cost of the goods

Insurance

Freight

Any other costs incidental to the importation

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Calculation of Taxes cont’d

Duty Rates

The rates applicable range from 0% to 25% depending on the nature of goods imported-

0% to 5% - Capital goods & Raw materials

15% - Intermediate goods

25% - Finished goods.

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Border Procedures

• Non- commercial consignments with value not more than USD 1,000.00 are duty free.

• Small value importations with value not more than USD 2,000.00 are cleared as petty consignments other than commercial consignments

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TAXPAYER OBLIGATIONS

• Register with ZRA on time

• File Tax Returns on time

• Make correct tax declarations and pay on time

• Issue Tax invoices

• Maintain tax records for a minimum period of six years

Note:

You can do all your tax business with ZRA Online

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ADDITIONAL INFORMATION

More information can be obtained from ZRA website at http//www.zra.org.zm

• Or visit any of the ZRA offices

• Or contact the call centre on 5972 or email to advice@zra.org.zm.